All I've been hearing about is how investors have the perfect opportunity to swoop into this cooling market, but I have another demographic in mind. Can you take a guess?
The answer: Renters!
Now I know what you're thinking: "But Jillian! The interest rates are so high!" or "All the buyers left the market, so I can't just jump in!" or maybe "That's wayyy too much money for me to spend right now!"
Well, let us give you a few reasons to consider ditching rentals and becoming a homeowner.
Reason #1: There are different ways to secure a lower interest rate
Did you know that you can ask a seller to pay for you to get a better interest rate? Yes! You heard us right. We can negotiate with the seller to pay the bank a fee that will give you a better rate than what you are seeing all over the news. The high interest rates we are currently seeing is creating a buyer’s market. Sellers are paying buyer’s closing costs and potentially even home repairs as part of the negotiation process. This level of negotiation hasn’t happened in years! And even if the seller of your dream home does not agree to pay down the interest rate, there is always the option to refinance your mortgage! Refinancing a mortgage allows a borrower to replace their original mortgage (and it's then agreed upon interest rate) with a new loan that has the current interest rate seen in the market.
Reason #2: If you have to pay for housing, wouldn't you want it to be for something you own?
As a renter, you are paying someone else’s mortgage payment. Why not pay your own? Your landlord is using that income to pay down their mortgage and potentially just putting money in their pockets. So when they go to sell, they won’t owe that much and make all the equity. Plus, as a renter, you can only go so far to make the place feel like home and at the end of the day, your landlord can decide whether you stay or go when your lease is up.
Let’s do some quick math. If you pay $2,100 a month, that is $25,200 a year into someone else’s pocket. Instead, take that $25,200 a year and invest it into your home’s value as your 5% down payment. That will get you a $500,000 home!
Now look at your own renting costs:
(Your monthly rent) x 12 = Your landlord’s annual income from you.
(Your annual rent) x (# of years you’ve rented) = how much you’ve been paying toward someone else’s expenses.
Reason #3: Less buyers in the market = less competition for you!
At this time, the higher interest rates have not only intimidated a lot of buyers out of the market, but straight up pushed them out of their pandemic-era buying range. This means that many buyers are waiting on the sidelines, watching inflation and how the rates will shake out going into the new year. We've seen evidence that interest rates will turn early in the new year; As soon as interest rates go down in the next few months, all the buyers who are waiting for this shift are also going to rush into the market. That is going to drive prices back up AND keep you from having the upper hand in negotiations. If you start looking now and enter into negotiations with a seller, you won't be up against 20+ other offers; your offer might actually be the first offer they've had in a month! Use this time wisely to look for a home you love in a far less frantic market than what we saw these past two years. You know the stock market saying: Buy low, sell high? Right now is the “lull” in the housing market. If you’re waiting to time something, start asking your Realtor now about your goals.
Take control of your living situation AND your investments. Buying a home is an investment that is still doing better than the stock market and the 401(k) you keep contributing to each paycheck. Renting can be very effective and an easy means of accessing housing, but consider purchasing your first property as a long term goal for your financial portfolio! We help both renters and first time homebuyers, so if you ever have any questions, you know who to call.
Til' next time,
Jillian
